Australian gold companies cheapest they have been in my career.12 Oct 2021 21:15
Nice note here:
https://stockhead.com.au/resources/sprott-ceo-rick-rule-says-the-easy-money-in-uranium-has-been-made-and-the-next-big-contrarian-play-is-gold/
Highlights:
“Right now, in the US market, precious metals and precious metals related securities constitute one half of one per cent of the total savings and invest assets.
“0.5%. The three-decade mean is 1.5% to 2%.
“So, if the combination of quantitative easing, debt and deficit and negative real interest rates just propels gold to its three-decade mean, demand for these products triples.
“And that is precisely what I think is going to happen.
“Because the gold price, and gold stocks haven’t moved [up] for year investors haven’t had validation. It is an asset out of favour.
“Producing gold companies, including some Australian gold companies, are probably the cheapest they have been in my career.
“They are generating massive amounts of free cash flow; 25-30% free cash flow on existing operations.
“These are very, very cheap companies – and they are cheap producing a commodity I am also bullish on.
“Northern Star (ASX:NST), Evolution (ASX:EVN) – those sorts of mid cap names. I would say any gold company in the world with a 10-year reserve life that is operating on a 20% free cash flow yield is just stupidly cheap.
“And if the gold price goes up — which I think is going to happen — that is icing on the cake.
“But you don’t need the gold price to go up to understand that these companies are generating substantial surplus capital and they going to begin to return it to shareholders.
“They are either going to take over other companies – and in that case you buy the M&A targets – or they are going to increase dividends, or they are going to buy back stock.
“Three virtuous choices.”
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